Consumers and merchants are familiar with credit cards and charge cards such as Visa, Mastercard, American Express, Discover, Diners/Carte Blanche and JCB (Japanese Credit Bureau). Each of these credit/charge cards hereinafter referred to collectively as “credit cards” for convenience) companies may have their own operating rules and regulations by which consumers and merchants must abide. As shown in FIG. 1, a typical transaction involves a cardholder 1 who is the consumer purchasing a good or service, a merchant 5 who is the transaction originator of the good or service purchased by the cardholder 1, an issuing bank 2 which is the financial institution that issued the credit card to the cardholder, and an acquiring bank 4 which is the financial institution that represents merchants in accepting credit card transactions. The term ‘bank’ is used herein in a broad, inclusive sense to mean any entity or person with who or through whom a financial transaction passes.
The acquiring bank 4 is also referred to as a merchant processor. A typical transaction cycle commencing with a purchase of a good or service by a cardholder 1 from a merchant 5 is also called a “first presentment” transaction. In the first presentment transaction cycle, the cardholder 1 purchases a product or service from a merchant 5. The merchant 5 presents the transaction data such as the charge for the good or service to the acquiring bank 4 for processing. The merchant 5 may present this charge to the acquiring bank 4 directly, or through an intermediary institution, a third party processor, such as First Data Corporation. The acquiring bank 4 then submits the charge transaction to a Visa Interchange Center (VIC) 3. The VIC 3 performs authorization and settlement functions and then submits the transaction to the issuing bank 2 and the issuing bank 2 charges the cardholder 1. If the merchant 5 presented the charge transaction directly to the intermediary institution, the intermediary institution submits the transaction through an acquiring bank which functions as a Visa Access Point (“VAP”), which then forwards the transaction to the VIC 3 and the VIC 3 submits the transaction to the issuing bank 2 for charge to the cardholder 1.
After a cardholder 1 receives his monthly billing statement from the issuing bank 2, the cardholder 1 may dispute a transaction or wish to inquire for further information about a transaction appearing on the monthly statement. This starts the retrieval cycle, as shown in FIG. 2. In roughly 80% of the cases, the cardholder 1 contacts the issuing bank 2 rather than the merchant 5. This step is shown as “initial contact” in FIG. 2. In fact, issuing banks usually invite their cardholders to bring any inquiries or disputes about transactions directly to the issuing bank and provide a telephone number, often a toll free telephone number or via a website.
The following is a description of a typical chargeback procedure. Assuming that the disputed transaction occurred on a Visa or MasterCard credit card, the issuing bank 2 requests validation and chargeback information from the VIC 3, as shown in step 2 of FIG. 2. The VIC 3 contacts the acquiring bank 4 and asks for validating documentation such as a signed credit card slip, as shown in step 3. The acquiring bank 4 contacts the merchant 5 and asks the merchant 5 to submit proof of the transaction, as shown in step 4. Each party is allowed a presentment period to submit the requested documentation. Since the presentment period may be significant, e.g., 45 days for each step in the chain of the transaction, the total time may be a matter of 6 months or more. Validating documentation proving the transaction, if any, is sent by the merchant 5 to the acquiring bank 4 through the Visa network 3 to the issuing bank 2, as shown in steps 5, 6 and 7. This entire process may be repeated depending upon circumstances and rules regarding the chargeback process. Rules regarding the chargeback process for non-written transactions shifts the risk of chargeback verification to the merchant and the transaction is presumed fraudulent without a written transaction slip. There are additional rules that apply and such rules vary between issuing and acquiring banks. With the advent of internet and mail order merchants, the number of non-face-to-face transactions has increased. This has therefore increased the number of non-written transactions. The interchange rules have not always kept pace with this change in consumer purchasing behavior. Because a consumer's purchase of a good or service over the telephone or internet does not result in a signed transaction, such transactions are presumed to be “fraud related” by the VIC 3. The VIC 3 initiates a certain protocol and investigation for fraud-related transactions. The acquiring bank 4 checks for credits and any preauthorizations and sends documentation received from the merchant 5 to the issuing bank 2. The disputed transaction is evaluated and a rules-based decision is made.
If the transaction is to be credited to the cardholder 1, the issuing bank 2 makes a chargeback against the merchant 5 through VIC 3 and the acquiring bank 4, as shown in steps 8, 10 and 11. VIC 3 maintains a history of chargebacks for each merchant 5. In step 10, VIC may impose additional fees and penalties on the chargeback. If a given merchant has a history of excessive chargebacks, such as more than 1% of sales, the merchant can be fined or terminated from servicing Visa cardholders. The merchant 5 eventually pays the funds to the acquiring bank 4 which forwards them to VIC 3, the issuing bank 2 and the consumer 1.
Thus, it is apparent that many hands touch a single transaction. Because many hands at numerous institutions are required to process a dispute over a single transaction, each institution incurs a cost to process a single disputed transaction. When this cost is multiplied across numerous transactions, the costs are quite high. Consequently, the inquiry process and chargeback process imposes significant costs on the merchant, the issuing bank, the acquiring bank and the credit/charge card network and delays valid credits or resolution to the consumer. Each entity must expend resources to track, record, investigate, and follow up on disputed transactions.
Therefore, there is a need for a process and apparatus which resolves disputed transactions and chargebacks in a manner which reduces the tremendous cost to the various parties and speeds up the valid credits or resolution to the consumer.